Question

Year 2017

George Clausen (age 48) is employed by Kline Company and is paid a salary of $42,536. He has just decided to join the company's Simple Retirement Account (IRA form) and has a few questions. Answer the following for Clausen:

http://www.opers.ok.gov/Websites/opers/images/pdfs/2017-Fed-Tax-Tables.pdf

a. What is the maximum that he can contribute into this retirement fund? $______________

b. What would be the company's contribution? $ ____________

c. What would be his weekly take-home pay if he contributes the maximum allowed retirement contribution (married, 2 allowances, wage-bracket method, and a 2.3% state income tax on total wages)? $ ___________________

d. What would be his weekly take-home pay without the retirement contribution deduction? $______________

Answer 1

a) As per the relevant provisions of IRS, the maximum amount of contribution that can be made to Simple Retirement Account (IRA form) for the year 2017 by an employee is $13,000.

b) As per the relevant provisions of IRS, the maximum amount of contribution that can be made to Simple Retirement Account (IRA form) for the year 2017 by the company is 3% of the total compensation earned by the employee.

The total amount of company's contribution would, therefore, be $1,276.08 (42,536*3%)

c) The amount of weekly take-home pay is calculated as follows:

Weekly Pay (42,536/52)	818
Less Weekly Retirement Contribution (12,500/52)	240.38
Weekly Wages	581.62
Less FICA Tax (818*6.2% + 818*1.45%)	62.577
Federal IncomeTax (Refer to Weekly Wage Table for Married Persons, Column for 2 Allowances)	26
State Income Tax (818*2.3%)	18.814
Weekly Take Home Pay	$470.83

d) The amount of weekly take-home pay is calculated as follows:

Weekly Pay (42,536/52)	818
Less FICA Tax (818*6.2% + 818*1.45%)	62.577
Federal IncomeTax (Refer to Weekly Wage Table for Married Persons, Column for 2 Allowances)	58
State Income Tax (818*2.3%)	18.814
Weekly Take Home Pay	$678.609

Comment